Monday, Feb 11, 2008 Posted on Mon, Feb. 11, 2008 Gas lease questions top list at tax hot line By BARRY SHLACHTER Star-Telegram Staff Writer Questions about Barnett Shale lease-signing bonuses were the most numerous from area residents calling a free income tax help line Sunday staffed by certified public accountants. The hot line, co-sponsored by the Star-Telegram and the Fort Worth Chapter of the Texas Society of CPAs for the fourth year running, featured local accountants offering free professional advice from the Star-Telegram building. Here is a sampling of the 516 questions fielded in four hours. How do I report the bonus payment I received last year? Walt Hatter, a CPA from Fort Worth: It is entered on Schedule E, either as "rent income" or "royalties." And it flows from Schedule E to line 17 on Form 1040. If you receive a 1099-M form declaring the bonus as "other income" or "non-employed compensation," call the leasing company and request a corrected 1099, reflecting the payment as either rental or royalty income. Can I take expenses, such as mortgage interest, property insurance and taxes, against the lease bonus money? Cyndy Kimberling, a Fort Worth CPA: The only deduction allowed would be a bank service charge for cashing the "sight" draft. Can filers still claim their children as dependents if they have gone off to college or still live at home while employed? Armando Palos, a Fort Worth CPA: Yes, they can still claim the child as a dependent for the $3,400 child dependency deduction up to 24 years of age, if the son or daughter is attending college full time, either out of town or in Fort Worth, or if working children still receive at least half of their support from the parents. Bruce A. Gilliam, a Burleson CPA, added: And even if a child, say, earns $9,000 while attending college, and the parents pay for his tuition and living expenses, they can still claim him or her as a dependent. I haven't filed a tax return in seven years. What do I do? John Stanberry, 53, a Fort Worth CPA, advised: Go back and file all the returns. Get current. It's up to the IRS whether or not to assess a penalty. Most people are scared to even talk to the IRS, and it's not that bad. In many situations, they just want to clear the case. But the nonfiler may lose refunds due him or her. The IRS will only issue refunds for the last three years. Hatter: Interestingly, 60 to 70 percent of nonfilers I've dealt with had refunds coming -- and lost the refunds because they were older than three years. Can ministers deduct their pastoral expenses? Nancy Black, a CPA employed by Thomson Tax & Accounting, a publisher of accounting materials, replied to two callers, both semiretired pastors: They can if they are self-employed. A lot of ministers have a choice, and many choose to be self-employed, which allows them to deduct job-related expenses and 100 percent of their health insurance costs. I've lost $40,000 doing stock trades. Can I classify myself as a day trader and declare them as "ordinary" losses? Palos: No. Losses on stock trades are considered capital losses, but such net losses are limited to $3,000 a year. And they will be carried over at a rate of $3,000 a year. I'm married, filing separately. My wife has already filed and received her refund, based on taking the standard (nonitemized) deduction. But I had $14,000 in mortgage interest because I refinanced our home. Can I deduct this interest? Field Lange, a Fort Worth CPA: No, because if your filing status is "married filing separately" and one spouse takes the standard deduction, the other spouse must take the standard deduction. However, if she amends her return and itemizes her deductions, and you do the same, you will get the $14,000 deduction. Kimberling added: Since Texas is a community property state, the law states that all income must be divided in half and reported on each other's return. So it's easier, and usually more tax- beneficial, to have the return prepared as "married filing separately."